In a landmark decision, the New Jersey Supreme Court recently expanded the scope of liability for real estate licensees in Gennari v. Weichert Co., REALTORS® holding that licensees can be liable for innocently repeating to a purchaser a misrepresentation that the seller made to the licensee. As a result, a licensee can be liable under the New Jersey Consumer Fraud Act for treble damages, attorneys’ fees and costs, even if the licensee did not intend to deceive the purchaser.
The facts in this case were particular egregious. The builder misrepresented the extent of his experience in the construction industry, the "old world craftsmanship" that would be used to build the homes, the quality of the subcontractors who would be working on the job, the material he would be using and his ability to timely complete the homes.
The broker, who had the exclusive listing for the 35-house development in Lawrence Township known as Squire’s Runne, conveyed these misstatements from the builder to the purchasers. Making matters worse, the builder’s wife was a salesperson for the broker and involved in selling the homes.
The builder compounded the problem by refusing to allow the purchasers to inspect the homes as they were being built. In fact, the builder even posted a guard to keep the purchasers away from the homes. Of course, none of the purchasers’ homes were completed on schedule and all of them were plagued by construction defects and the use of inferior materials.
Based upon these facts, the Court held that, under the Consumer Fraud Act, if a real estate licensee makes a misrepresentation to a purchaser, however innocently, the licensee may be liable even if he/she acted in good faith and did not intend to deceive the purchaser or know that the representation was false; a licensee is strictly liable for a misrepresentation, as long as it is material to the transaction and a statement of fact that is found to be false; a licensee can be liable if the he/she knows about, but fails to disclose, such material information: and non-economic damages, such as infliction of emotional distress and interference with beneficial use and enjoyment of the home, are not recoverable under the Act, but can be awarded under ordinary concepts of negligence.
Real estate licensees therefore must carefully undertake a reasonable investigation of all facts provided to them by builders and other sellers before simply repeating them to potential purchasers. If it is not possible to verify such information, at the very least, the licensee should include a clear and unambiguous disclaimer (preferably in writing) that he/she has no independent knowledge as to the accuracy of the information. This is especially true if the representation is material to the purchaser’s decision whether or not to buy the home.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
We operate a free-to-view policy, asking only that you register in order to read all of our content. Please login or register to view the rest of this article.